STATE OF CALIFORNIA GRAY DAVIS, Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
June 14, 2001 Agenda Item No. H-1a
Meeting Date 6/28/2001
TO: PARTIES OF RECORD IN APPLICATION 99-03-025
Enclosed is Item H-1a Alternate Proposed Decision of Commissioner Lynch to the Proposed Decision of Administrative Law Judge (ALJ) O'Donnell previously mailed to you. This item is on the Commission's agenda for June 28, 2001.
When the Commission acts on this agenda item, it may adopt all or part of it as written, amend or modify it, or set aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.
As set forth in Rule 77.6, parties to the proceeding may file comments on the enclosed alternate at least seven days before the Commission meeting or no later than June 21, 2001. Reply comments should be served by June 26, 2001. An original and four copies of the comments and reply comments with a certificate of service shall be filed with the Commission's Docket Office and copies shall be served on all parties on the same day of filing. The Commissioners and ALJ shall be served separately by overnight service.
/s/ LYNN T. CAREW
Lynn T. Carew, Chief
Administrative Law Judge
LTC: abw
Enclosure
COM/LYN/TJL/abw DRAFT H-1a
06/28/01
Decision ALTERNATE PROPOSED DECISION OF COMMISSIONER LYNCH (Mailed 6/14/2001)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Application of Roseville Telephone Company (U 1015 C) to Review Its New Regulatory Framework. |
Application 99-03-025 (Filed March 8, 1999) |
Mark P. Schreiber, Attorney at Law,
and E. Garth Black for Roseville Telephone Company, applicant.
Colleen O'Grady and Mary Vanderpan, Attorneys at Law, for Pacific Bell, intervenor.
Sindy J. Yun and Jason Zeller, Attorneys at Law, for the Office of Ratepayer Advocates.
TABLE OF CONTENTS
Title Page
OPINION 2
I. Summary 2
II. Background 2
III. Procedural History 4
IV. Comments on the Proposed Decision 5
V. Overview 6
VI. The Audit 6
A. Background 6
B. Corporate Organization, Operations and Affiliate Relationships 7
1. Organizational Overview 7
2. Overview of Non-Regulated Telephone Operations 8
3. Overview of Affiliate Relationships 9
C. Individual Audit Calculations 10
1. Audit Calculation 1 - Costs Attributable to Duplicated Holding Company Responsibilities 10
a. ORA 10
b. RTC 11
c. Discussion 11
2. Audit Calculation 2 - The CEO and Chief Financial Officer (CFO) and Their Staffs Failed to Charge Their Development Efforts to Affiliates 11
a. ORA 11
b. RTC 12
c. Discussion 12
3. Audit Calculation 3 - The Vice President of Network Development Failed to Properly Charge His Effort in Developing RCS Wireless. 13
a. ORA 13
b. RTC 14
c. Discussion 14
4. Audit Calculation 4 - RTC Did Not Properly Allocate Cost for the Vice President of Customer Service to RDC. 14
a. ORA 14
b. RTC 15
c. Discussion 15
5. Audit Calculation 5 - Marketing Executive Costs Charged But Not Billed to Roseville Cable Development 15
a. ORA 15
b. RTC 15
c. Discussion 16
6. Audit Calculation 6 - Accounting, Budget and Finance Efforts Attributable to Affiliate Development 16
a. ORA 16
b. RTC 16
c. Discussion 17
7. Audit Calculation 7 - Revenue Accounting Efforts Attributable to Non-Regulated Accounts and to Affiliates 17
a. ORA 18
b. RTC 18
c. Discussion 19
8. Audit Calculation 8 - Information Services Costs 19
a. ORA 19
b. RTC 20
c. Discussion 20
9. Audit Calculation 9 - Valuation Project Costs Attributable to RCS Wireless 21
a. ORA 21
b. RTC 21
c. Discussion 21
10. Audit Calculation 10 - Regulatory Costs Charged But Not Billed to Roseville Cable Development 22
a. ORA 22
b. RTC 22
c. Discussion 22
11. Audit Calculation 11 - Human Resource Costs Attributable to Affiliate Development 22
a. ORA 23
b. RTC 23
c. Discussion 23
12. Woman, Minority and Disabled Veteran (WMDV) Program Purchasing Costs 24
a. ORA 24
b. RTC 24
c. Discussion 25
13. Audit Calculation 13 - Purchasing Costs Attributable to Affiliates 25
a. ORA 25
b. RTC 25
c. Discussion 26
14. Audit Calculation 14 - Common Office Equipment Maintenance Costs 26
a. ORA 26
b. RTC 27
c. Discussion 27
15. Audit Calculation 15 - Common Telephone Museum Administration Costs 27
a. ORA 27
b. RTC 27
c. Discussion 28
16. Audit Calculation 16 - Product Development Section Efforts Attributable to Non-Regulated Telephone Activities 28
a. ORA 28
b. RTC 29
c. Discussion 29
17. Audit Calculation 17 - Product Development Section Management and Administration Costs Attributable to RLD 29
a. ORA 29
b. RTC 30
c. Discussion 30
18. Audit Calculation 18 - Sales Section Efforts Attributable to Development of RLD 30
a. ORA 30
b. RTC 30
c. Discussion 31
19. Audit Calculation 19 - Alarm Monitoring, Sales Misallocated to Regulated Expense 31
a. ORA 31
b. RTC 31
c. Discussion 31
20. Audit Calculation 20 - Customer Services Support Costs 32
a. ORA 32
b. RTC 32
c. Discussion 33
21. Audit Calculation 21 - Customer Service Collection Costs 33
a. ORA 33
b. RTC 34
c. Discussion 34
22. Audit Calculation 22 - Alarm Monitoring Costs Attributable to the Non-Regulated Vendor Alarm Business 35
a. ORA 35
b. RTC 35
c. Discussion 35
23. Audit Calculation 23 - Employee Health Insurance Attributable to RDC 35
a. ORA 35
b. RTC 36
c. Discussion 36
24. Audit Calculation 24 - Corporate Advertising Charged to Regulated Accounts 36
a. ORA 36
b. RTC 36
c. Discussion 37
25. Audit Calculation 25 - Development Costs Billable to RLD 37
a. ORA 37
b. RTC 38
c. Discussion 38
26. Audit Calculation 26 - Network Engineering Costs Attributable to RCS Wireless 39
a. ORA 39
b. RTC 39
c. Discussion 39
27. Audit Calculation 27 - Central Office Facilities Attributable to RCS Wireless 40
a. ORA 40
b. RTC 40
c. Discussion 40
28. Audit Calculation 28 - Office Space Costs Attributable to RCS Wireless and RDC 41
a. ORA 41
b. RTC 41
c. Discussion 41
29. Audit Calculation 29 - Tower License and Roof Space Attributable to RCS Wireless 42
a. ORA 42
b. RTC 42
c. Discussion 42
30. Audit Calculation 30 - Indirect Facilities Overheads Attributable to Non-Regulated and Affiliate Operations 43
a. ORA 43
b. RTC 44
c. Discussion 44
31. Audit Calculation 31 - Residual Costs Attributable to Affiliates 45
a. ORA 45
b. RTC 45
c. Discussion 46
32. Audit Calculation 32 - Residual Costs Attributable to Non-Regulated Operations 50
a. ORA 50
b. RTC 51
c. Discussion 51
33. Audit Calculation 33 - Regulated Directory Revenue Shifted to RLD 51
a. ORA 51
b. RTC 52
c. Discussion 52
D. Calculation of NRF Results of Operations and Earnings 52
1. Regulated Directory Revenues 53
a. ORA 53
b. RTC 54
c. Discussion 54
2. Expensing of Software Development Costs 54
a. ORA 54
b. RTC 55
c. Discussion 55
3. Income Tax Expense 55
a. ORA 55
b. RTC 56
c. Discussion 56
E. Adopted Audit Results - Sharable Earnings 56
F. ORA's Request for Another Audit 56
VII. Sharing 57
VIII. Depreciation 64
IX. Price Indexing 67
X. Z-Factor Process 68
XI. Monitoring Reports 77
XII. Pricing Flexibility 78
XIII. Promotional Offerings 78
XIV. Service Quality 79
Findings of Fact 81
Conclusions of Law 83
ORDER 85
I. Summary
This decision addresses Roseville Telephone Company's first triennial review of its New Regulatory Framework (NRF). By this decision, we (1) retain the sharing mechanism; (2) eliminate depreciation reviews, (3) suspend the I-X (inflation minus productivity) portion of the price adjustment formula, (4) eliminate most Z-factor adjustments; (5) establish a limited exogenous (LE) factor mechanism; and (6) modify the monitoring report requirements. In addition we require Roseville Telephone Company (RTC) to amend its shareable earnings filing for 1999 to reflect certain adopted results of an affiliate transactions audit conducted by the Office of Ratepayer Advocates (ORA). We also order a refund and a permanent revenue reduction related to post-retirement benefits other than pensions (PBOP).
